AMD, Fujitsu Join Forces To Master Flash Market

No. 2 chipmaker AMD (NYSE: AMD) has unveiled a joint venture with Japan-based Fujitsu, creating a US$3 billion global company bent on mastering the market for flash memory products.

Known as FASL LLC, the new venture is made up of the two companies' flash memory businesses, with a combined workforce of 7,000. It will market flash products under the brand name "Spansion."

Aiming High

The companies did not mask their intention to use the effort to grab the lion's share of the flash market.

"We plan to make Spansion Flash memory the pre-eminent brand in the memory market," said Dr. Bertrand Cambou, who was named as CEO of the FASL LLC. "We expect that the combination of our focus on customers, next-generation technology, process design and integrated manufacturing will help us emerge as the global flash memory leader."

The new company, which is 60 percent owned by AMD, will be headquartered in Sunnyvale, California, providing a welcome boost to the Silicon Valley economy, but it will maintain a Japanese headquarters in Tokyo as well. Several AMD facilities in the United States, including an Austin, Texas, fabrication plant and a development center in Sunnyvale, also will fall under the control of the joint venture.

How Much of a Threat?

Analysts say it is unclear how much of a competitive threat the joint venture will pose to dominant chipmaker Intel (Nasdaq: INTC). Although some analysts raised flags when Intel said its flash sales had declined earlier this year, the company has since recovered some of its losses, which it blamed on an ill-timed decision to hike prices on some of its products.

"Where AMD has benefited it's been on the price front," IDC analyst Shane Rau told the E-Commerce Times. "There seemed to be more gains out there for them to grab that they didn't capitalize on when the time was right."

The joint venture may help AMD solidify its position in the Asian market, where it is already strong, but it will take time to tell if it will have benefits in the United States and elsewhere, Rau added.

Old Pals

The joint venture expands a history of cooperation between the two companies, which have been producing semiconductors together since 1993.

Late last week, AMD said it was making strong gains in China and had launched an ambitious sales push to grow its sales in that country at twice the pace of overall market expansion. That move promises to spark another battle for market share, since Intel likely will move to defend its turf, possibly sparking a localized price war.